Start-ups and many small businesses start for 4 reasons.
- Founder’s passion turned into a business
- Founder’s skill turned into a business
- Founder’s knowledge turned into a business
- Founder’s frustration turned into a business
To move a start up from a lifestyle self employment business to an invest-able business, the business must have 2 of the 4 reasons. Then and only then, will it be an invest-able business. Uber was a combination of frustration and knowledge. Frustration at not being able to quickly hail a ride and knowledge of tech to make Uber become a reality. Jamie Oliver’s passion for good healthy eating and his skill for self-promotion and branding turned his business into a global sensation.
What makes most start ups investable is the combination of 2 or more reasons. By themselves, with only one reason, rarely do they become investable. A chef’s passion for food without the skill of promoting a brand means expanding beyond one restaurant is unlikely and without expansion pathways, investors won’t be interested to fund growth. A frustration with taxi services without the skill of global tech means the establishment of a local town car service limited to one city at best.
The key then in planning the life cycle of your start up is to determine which 2 reasons as a minimum you will focus on developing and combining as you move to the growth stage. Once this is done, and done well, your business may be invest-able, and this will reflect in the valuation.